The meeting began tensely, charged by one of the biggest seizures of oil assets in recent Latin American history. Thirty-three stories above Buenos Aires, executives of the leading oil companies of Mexico, Argentina and Spain had gathered around a long boardroom table with Argentine and Spanish government ministers to try to end a bitter diplomatic and legal feud.

Repsol SA, the Spanish company whose controlling stake in Argentina’s YPF SA had been expropriated 19 months earlier, had been demanding redress through international arbitration.

Argentine officials were worried that the dispute was hindering the country’s ability to develop its huge energy resources.

It was the entry of a third party, Petróleos Mexicanos SA, that brought the dispute to a head in the Argentine capital Monday, according to participants in the four-hour meeting. Pemex was pressing for a negotiated deal that would ease its access to Argentina’s riches and threatening to dump part of its 9.3% stake in Repsol if the dispute lingered.

The preliminary deal they reached, a payment of $5 billion in Argentine government bonds to Repsol, served the converging political and commercial interests of each of the companies and countries involved, the participants said.

“Everybody wins,” YPF Chairman Miguel Galuccio said Thursday, a day after Repsol’s board accepted the outline of the deal and agreed to negotiate details with the Argentine government. The 11 months of behind-the-scenes work, he said, “was a team effort” with crucial backing of all three governments.

For Argentina, an end to the dispute would remove a huge legal burden faced by state-owned YPF and potential partners interested in developing the South American country’s substantial shale oil and gas reserves.

For Repsol, it would bring compensation for the loss of a key asset. The compensation is about half the $10 billion Repsol had demanded, but some Argentine officials were opposed to paying anything—until President Cristina Kirchner overruled them.

A deal also would help Repsol keep peace with Mexico as the country prepares an industry overhaul that would open its oil and gas reserves to foreign companies for the first time in 75 years.

For Pemex, a deal would boost the value of its shares in Repsol. According to people familiar with the company’s plans, Pemex executives believed a deal also could help them gain access to the future development of Vaca Muerta, a vast formation of shale oil and gas resources in southern Argentina.

Mrs. Kirchner’s government has a lot at stake. In 2011, Argentina became a net energy importer for the first time in decades. Purchasing natural gas from abroad at high international prices is helping deplete the country’s currency reserves.

YPF’s discovery of Vaca Muerta that year promised a solution to the country’s energy woes. Argentina now ranks among the top five countries in potentially recoverable shale oil-and-gas reserves, according to the U.S. Energy Information Administration.

But the country lacks the capital to develop the reserves in quantities big enough to offset overall declines in domestic oil and gas production. Mr. Galuccio believed that a Repsol deal could attract more investment and expertise, including assistance from Pemex toward improving return at mature wells, and help YPF borrow in international markets.

Argentina twice had offered Repsol compensation for the expropriated holdings in the form of stakes in Vaca Muerta, people familiar with the negotiations said. Repsol rejected the offers because they would have required investing substantial sums in Argentina, the people said.

Despite opposition in her government, Mrs. Kirchner proposed paying Repsol something closer to what it was seeking, a person familiar with the talks said.

To help reach an agreement, Argentina turned to an ally in Pemex. YPF’s Mr. Galuccio and Pemex Chief Executive Emilio Lozoya became friends years ago when Mr. Galuccio worked in Mexico with U.S.-based oil-services company Schlumberger Ltd.

As part of the pressure, Pemex put up for sale half its Repsol stake and became openly critical of Repsol Chairman Antonio Brufau’s handling of the dispute.

Spain’s government insisted on compensation for Repsol but took a back seat as the company pressed its case through legal channels. Then Pemex gave Spanish officials a reason to get more active.

The Mexican company told the Spanish government that it would buy a 51% stake in struggling Spanish shipbuilder Hijos de J. Barreras only if Repsol reached an agreement with Argentina, said a senior official at the Mexican Energy Ministry. Barreras is bidding with a Pemex unit on a contract valued at hundreds of millions of euros for two Pemex floating hotels for offshore oil workers.

In mid-November Spanish Energy Minister José Manuel Soria delivered to Pemex and Mexican government officials the outlines of a tentative deal proposed by Repsol. He flew to Buenos Aires for the meeting Monday, the first face-to-face talks between Repsol and Argentine government officials since the expropriation.

YPF, Pemex and Repsol executives, Argentine government officials and Mr. Soria arrived at YPF’s headquarters for the 11 a.m. meeting on a public holiday that commemorates a 19th-century naval battle pitting Argentina against Britain and France.

On one side of the boardroom table sat Mr. Galuccio, Argentine Economy Minister Axel Kicillof, and Carlos Zannini, head of legal affairs for Argentina’s government and a confidant of Mrs. Kirchner. Mr. Zannini introduced those sitting on the other side: Mr. Soria, Pemex’s Mr. Lozoya, Repsol executives including Chief Operating Officer Nemesio Fernández-Cuesta and Argentina’s ambassador to Spain, Carlos Bettini.

The tense atmosphere became more cordial as the talks progressed. At one point, Mr. Galuccio pulled out a calculator to demonstrate the benefits of Argentina’s offer. The deal they reached was similar to the proposal that Spain’s Mr. Soria took to Mexico: Argentina would pay out a $5 billion government bond with 10-year maturity and an interest rate between 8.25% to 8.75%, people familiar with the talks said.

The bond would pay no interest during an initial several-year grace period, but Repsol could sell it at any time, likely with a discount on the face value, these people said. The company also would be able to begin recovering the face value of the bond following the grace period.

The next day came a payoff for Spain: Pemex announced it had completed an agreement to purchase the majority stake in the Spanish shipbuilder.

2. ARGENTINA’S YPF: SWALLOWED PRIDE (The Economist)

Nov 30th 2013

A deal with Repsol is a small step towards reversing an energy deficit

HAVING been an exporter of hydrocarbons not long ago, Argentina now imports natural gas from Bolivia and oil from Venezuela—even though it is sitting on what is probably one of the world’s biggest shale oil-and-gas fields, Vaca Muerta in Patagonia. When President Cristina Fernández last year ordered the expropriation of Repsol’s controlling stake in YPF, the country’s main oil company, she saw this as a way of ensuring Vaca Muerta would be developed by Argentines, not Spaniards. But the nationalisation placed YPF at the centre of an international legal dispute.

This left Miguel Galuccio, YPF’s new CEO, running a company with little chance of raising the capital it needs if it is to develop its slice of more than a third of Vaca Muerta’s acreage. And it is one of several problems making it hard for Argentina to cut an energy deficit that according to Miguel Kiguel, an economist, is heading for $7 billion this year. That deficit is a big reason behind a plunge in the Central Bank’s reserves to a seven-year low.

All this explains why the government this week offered Repsol compensation, reportedly of $5 billion, payable in government bonds. That is hardly generous: Repsol wanted $10.5 billion in cash. Nevertheless, Repsol’s board gave the offer a cautious welcome; the alternative is years of international arbitration.

For Argentina to become self-sufficient again in energy by 2030 requires investment of around $200 billion, of which $140 billion is in shale and about $60 billion in conventional oil and gas, reckons Jorge Ferioli of the local branch of the World Energy Council, a pressure group. A deal with Repsol improves Mr Galuccio’s chances of getting other investors to follow Chevron, which in July agreed to invest a modest $1.24 billion over five years in a pilot scheme in Vaca Muerta.

But only a bit. Under Mr Galuccio, an experienced oilman, YPF’s investment spending has doubled this year, but only to about $5 billion. A big obstacle to going faster is that Argentina’s dispute with holders of defaulted sovereign bonds limits YPF’s ability to tap international financing on reasonable terms.

The government has taken some steps to attract investment. It has raised the wellhead price it pays for newly developed gas, approved a new hydrocarbons law and issued a decree allowing companies to repatriate profits after investing at least $1 billion over five years. But drawing in more investment means allowing multinationals to import equipment, export production and repatriate profits freely, according to a senior industry source in Buenos Aires. It doesn’t help that the official exchange rate is 60% overvalued, which makes it unattractive to bring in dollars.

“To get money you need to be trusted,” the source says. Grudging though the deal looks, compensating Repsol is at least a first step towards restoring investors’ confidence in Argentina. But it is only one of many that are still needed.

A final accord resolving the dispute over state oil company YPF looks likely. This may pave the way for new hydrocarbons investments and will represent a key step in government efforts to resolve pending investor disputes and regain access to international credit.

The board of Spanish Repsol yesterday unanimously “valued positively” the ‘pre-agreement’ reached on Monday on compensation for the 2012 expropriation of 51% of YPF. The preliminary accord reportedly involves payment of 5 billion dollars in ten-year Argentine government bonds with a grace period of 2-4 years and an annual interest rate of some 8%; final acceptance would commit Repsol to abandoning future litigation over YPF. Repsol is reportedly insisting on closer scrutiny of the ‘fine print’ involved in the agreement, in particular the guarantees offered for the payments. Repsol’s management did not receive unanimous support from the board, with Mexico’s Pemex (owner of 9.3% of Repsol and a key player in the YPF accord) considering that it has “not offered the desired results for the company and its shareholders”, apparently after it rejected an earlier joint venture proposal to exploit part of the Vaca Muerta shale reserves in southern Argentina.

4. ARGENTINA WEIGHS PUTTING POPE FRANCIS’ FACE ON A COIN (CNN.com)

By Catherine E. Shoichet

November 27, 2013

Just a few days after Pope Francis decried capitalism, Argentine lawmakers weighed a new way to honor him: putting his face on a coin.

A proposal to create a commemorative coin as a tribute to Latin America’s first Pope passed in Argentina’s lower house on Thursday, Rep. Oscar Cachi Martinez said in a post on his official Facebook page.

Martinez first proposed the measure in April, and it garnered approval from congressional committees earlier this month. Now the bill will be sent to the South American county’s Senate for consideration.

The goal of the coins, according to the text of the proposed law, is “to commemorate an event of global dimensions, so our present and future generations remember this splendid act in the history of humanity, in which the principal actor is an Argentine.”

Even though about 480 million of the world’s 1.2 billion Catholics live in the region, for centuries, the church’s top job had gone to Europeans.

That changed with the announcement that then-Argentine Cardinal Jorge Mario Bergoglio, who served as archbishop of Buenos Aires, would become the new Pontiff.

Many Argentines were overjoyed. But the news was met with a more tepid response from President Cristina Fernandez de Kirchner, who sent a dry letter of congratulations that failed to mention that Francis was the first Pope from Argentina and the Western Hemisphere.

Several years before, Fernandez’s government had sparred with Bergoglio in a notorious war of words over a gay marriage law the President backed.

But since his election in March, Francis has made headlines by decrying the iniquities of modern capitalism, embracing the poor and people with disabilities and reaching out to gays and lesbians.

At the same time, the 77-year-old pontiff has sought to to awaken a spirit of joy and compassion in the church, scolding Catholic “sourpusses” who hunt down rule-breakers and calling out a “tomb psychology” that “slowly transforms Christians into mummies in a museum.”

And Martinez says there’s no doubt Pope Francis is already leaving his mark.

“To this Argentine who, for being a good pastor to his flock, especially to those who most need him, we all owe a tribute, a great tribute,” Martinez said in a post about the initiative on his official website, making the case for Argentina’s lawmakers to act.

“We believe that the way of being, the charisma and the humility of Pope Francis have managed to revive global sympathy for the Catholic Church,” he said.

MADRID — Spanish energy company Repsol would get $5 billion in compensation from Argentina for the expropriation last year of the firm’s YPF unit and its vast holdings of unconventional oil and gas fields, a person with direct knowledge of the preliminary deal said Tuesday.

Under terms of the proposal to be considered Wednesday by Repsol’s board, the Spanish company would get the money in Argentine bonds denominated in U.S. dollars. In return, it would drop legal action against Argentina for expropriating Repsol’s controlling stake in YPF in 2012 without payment, said the person, who was not authorized to disclose details and spoke on condition of anonymity.

Investors on Tuesday cheered the news, sending Repsol shares up 4.28 percent to close at 19.24 euros ($26.03) in Madrid.

News of the deal came late Monday after Repsol executives met in Buenos Aires with government officials from Argentina and Spain and the chief executive of Mexico’s state oil company, Petroleos Mexicanos, which holds a minority stake in YPF.

The deal could pave the way for Pemex to join the exploration of the vast Vaca Muerta oil deposit in Neuquen province, where YPF says 15 teams are already extracting more than 10,000 barrels a day.

Argentina’s Economy Minister Axel Kicillof, the mastermind behind the YPF expropriation, remained coy about the compensation deal. “The agreement is somewhat confidential because you can’t just go around carelessly throwing out values,” said Kicillof, who is now leading Argentina’s negotiations. “It could affect shareholders and affect the stocks.”

Kicillof said that at the time of the takeover, Repsol was too hasty when it demanded $15 billion in compensation and later $10.5 billion.

“The Argentine state acted with a lot of prudence and sobriety,” he said. “We’re waiting to know more about the company to be able to give it a fair value, but I think Repsol acted rash by giving out just the numbers they wanted.”

The values and instruments of the deal will remain secret until Repsol’s board votes on the proposal on Wednesday, Kicillof said. He added that Argentina is satisfied with YPF’s performance after it seized control of its leading oil company from Spanish hands.

“But we’re now here to look forward,” he said. “We want to finish determining these values to close this deal once and for all.”

The seizure of YPF infuriated Spain and led to harsh criticism of Argentina by the European Union, the United States and some Latin American leaders. Argentina had claimed Repsol SA was not investing enough in the South American country’s oil industry — claims vigorously denied by Repsol.

The expropriation of Argentina’s national oil company, which was privatized in the 1990s, was hugely popular among Argentines because many blame privatizations and other free-market policies of that decade for the country’s economic crisis and debt default in 2001-2002.

Repsol had said its 51 percent stake in YPF was worth $10.5 billion in compensation and sued Argentina seeking payment.

The fight also strained ties between Spain and Argentina, and a statement released by Argentina’s economy ministry said negotiators hoped the deal would “contribute to normalize and strengthen the historic ties between the three countries and their companies.”

Argentina has the world’s third-largest deposits of shale oil and gas, but needs international help to develop them. Only Chevron has so far made a commitment to help develop the fields, and it was subsequently sued by Repsol.

2. ARGENTINA IS SAID TO BE NEAR DEAL TO COMPENSATE REPSOL (The New York Times)

By Stanley Reed

27 November 2013

LONDON — Argentina and Repsol, the Spanish energy company, appear to be nearing a deal on compensation for the government’s seizure of Repsol’s stake in an Argentine oil producer in 2012.

Representatives from the Spanish and Argentine governments and company executives said they had reached an agreement in principle on Monday in Buenos Aires on indemnifying Repsol for the 51 percent of the energy company YPF that Argentina expropriated without payment. The government of President Cristina Fernández de Kirchner had justified the action by saying that Repsol was not investing enough in Argentina.

The government now appears to want to repair relations with global investors and attract badly needed capital to the country’s oil and natural gas industry. Argentina’s Vaca Muerta field, a potentially rich trove of oil- and gas-bearing shale rock, has drawn acute interest from multinational energy companies.

”This is one of the hottest areas now, after Brazil,” said Fadel Gheit, an oil analyst at Oppenheimer in New York.

Argentina is offering about $5 billion in bonds as compensation, and Repsol is likely to accept if the payment is guaranteed, according to a person with knowledge of the matter, who asked not to be identified because the transaction had not been completed.

Repsol lost two-thirds of its global oil production capacity and half of its reserves when the majority of its stake in YPF was seized. Repsol filed a complaint with the World Bank arbitration tribunal and sought $10.5 billion in compensation.

Repsol’s board of directors was expected to examine Argentina’s proposal at its meeting on Wednesday in Madrid.

”Any deal is likely to add value to Repsol’s shares,” said Neill Morton, an analyst at Investec in London. ”The market took the view that Repsol might get nothing” or might require several years to reach a settlement, he said.

Repsol shares closed up more than 4 percent on Tuesday in Madrid. Shares in YPF, in which Repsol still holds a 12 percent stake, were up more than 10 percent in Buenos Aires.

Argentina is under pressure to reach a deal because the seizure of the YPF stake chilled foreign investment in the country. Argentina needs substantial capital to develop the Vaca Muerta, or Dead Cow, field.

Chevron has a $1.2 billion joint venture with YPF to develop a small portion of the field, but YPF would like Chevron to expand its activities and wants to bring in other partners. Repsol has sued Chevron for joining with YPF, but a compensation agreement would probably end that dispute.

Argentina’s production of oil has fallen to about 660,000 barrels a day in 2012, less than 1 percent of the world total, according to the BP Statistical Review of World Energy. The country has begun to import liquefied natural gas at high market prices, giving the government an incentive to encourage domestic production.

Its shale oil and gas resources, which are believed to be among the largest in the world, could drastically change the picture. The United States Energy Information Administration estimates that Argentina ranks behind only the United States and China in shale gas reserves, with 802 trillion cubic feet of technically recoverable gas, and is fourth behind Russia, the United States and China in shale oil, with 27 billion barrels.

”What is holding Argentina back from developing these resources,” Mr. Gheit said, is ”aboveground risk” — including the possibility of government seizure of assets.

In a presentation at an industry conference in London in October, Miguel Galuccio, YPF’s chief executive, said the characteristics of the shale deposits in the Vaca Muerta were superior to those of fields in the United States, making them likely to be prolific producers of oil and gas. He identified several other fields in Argentina that he said had shale potential.

Any agreement between Argentina and Repsol would probably include Pemex, the Mexican state oil company, which has close to a 10 percent stake in Repsol. Pemex helped broker the proposed compensation accord and hopes to help develop Argentina’s shale energy resources.

MADRID — Spanish oil company Repsol SA would receive $5 billion in Argentine government bonds as compensation for the South American country expropriating its controlling stake in YPF SA last year, according to people familiar with a proposal that Repsol has agreed to bring to a board vote.

The dollar-denominated bonds would be secured by guarantees, and the company would face no requirements to reinvest any money in Argentina and no restriction on its ability to sell the bonds, these people said Tuesday. The interest rate and other terms of the bonds were unclear.

Repsol’s board is likely to accept the basic structure of the proposed agreement at a meeting on Wednesday, because it has the implicit support of the Spanish and Mexican governments, the people said. A compensation deal would end an 18-month standoff between Spain and Argentina over the expropriation of 51% of YPF.

The Spanish oil company currently holds a 12% stake in YPF.

A settlement would be positive for Repsol as it seeks to grow outside its main production areas of Latin America and northern Africa, while for Argentina it could restore confidence as the country needs billions of dollars in investment to exploit untapped hydrocarbon reserves. It would also help to patch up relations between Spain and Argentina, which were strained by the YPF takeover.

Spanish Energy Minister Jose Manuel Soria personally delivered an outline of the proposed deal on Nov. 15 to Mexican government officials and the chief executive of Petroleos Mexicanos, or Pemex, which has a 9% stake in Repsol, said a person familiar with the talks. Mr. Soria accompanied top Repsol executives to a meeting with Argentina’s new economy minister in Buenos Aires, where the plan won tentative approval on Monday. The chairman of Catalan bank CaixaBank SA, Repsol’s largest single shareholder with 12%, also attended that meeting.

Repsol Chairman Antonio Brufau, who had led efforts to fight Argentina’s nationalization of YPF last year, was absent from Monday’s meeting. One person familiar with the matter said Mr. Brufau approved of the proposal but felt the company would make more progress toward a deal if other Repsol executives attended in his place.

An issue for Repsol, and a potential sticking point, is whether its board members trust the guarantees underlying the offer, said a person familiar with the proposed deal. It wasn’t clear on Tuesday what guarantees were offered. Repsol said its decision will be based on what the board considers best for the company and its shareholders.

If Repsol ratifies the deal, both it and Argentina would drop all lawsuits in the case, the two parties said.

Investors welcomed the preliminary accord. In Madrid, Repsol shares rose 4.3% to close at 19.24 euros ($26.01) on Tuesday, and YPF shares traded in New York increased 10% to $29.37.

Some analysts cautioned that, without knowing all the terms, it would be difficult to fully value the deal or predict how quickly Repsol may be able to sell the bonds.

The preliminary agreement “is a step in the right direction, [but] we feel Repsol could still extract better terms for its minority shareholders,” said Alejandro Demichelis, an analyst with Exane BNP Paribas.

In June, Repsol rejected a Pemex-brokered compensation offer that the Argentine government valued at $5 billion. Repsol’s board said the offer, which included a stake in a company that would hold land in YPF’s large oil and gas fields called Vaca Muerta, didn’t fairly value the assets. And Repsol would have been required to reinvest about $1.5 billion of the compensation in Argentina.

People familiar with the matter said that Repsol wouldn’t reinvest in Argentina or take part in the development of Vaca Muerta. It wasn’t clear whether Repsol would keep its remaining stake in YPF.

The government of Argentine President Cristina Kirchner, meanwhile, is seeking to mend ties with foreign creditors at a time when the country faces foreign-currency shortages and limited borrowing options. Mrs. Kirchner’s cabinet chief Jorge Capitanich told reporters on Tuesday that the proposed Repsol settlement could help Argentina attract investment for oil and gas exploration and production.

Argentina is thought to have vast deposits of unconventional oil and gas, ranking second in the world behind China in potentially recoverable shale-gas reserves with 802 trillion cubic feet, according to a recent study by the U.S. Energy Information Administration.

The board of Repsol is poised to accept an offer of $5bn compensation from the Argentine government for the nationalisation of its YPF subsidiary in a move that will draw a line under a bitter year-long diplomatic stand-off with Madrid.

The Spanish oil company’s management, under pressure from its largest shareholders, has agreed in principle to settle the legal battle over Argentina’s seizure of its majority stake in YPF but is demanding guarantees over how the $5bn will be paid, people close to the situation said.

While the final details of a deal have not yet been decided ahead of a Repsol board meeting on Wednesday, Argentina has indicated to the company and the Spanish government that it would pay the $5bn using its own government debt.

As a consequence of Argentina’s default at the turn of the century, the country is still being pursued by a long line of international creditors and Repsol’s management is seeking legal assurances that any payment would be enforceable, people close to the talks said.

Repsol, which saw its shares jump more than 4 per cent on news of a possible deal, declined to comment.

If the deal goes ahead, it could help to unlock billions of dollars of investment that YPF is seeking to develop its Vaca Muerta shale reserves, which are among the world’s largest unconventional oil and gas deposits.

An increase in energy production would help Argentina reverse a growing energy deficit, which is putting pressure on rapidly dwindling foreign exchange reserves, jeopardising the stability of the government of President Cristina Fernández.

The populist government seized majority control of YPF, the country’s former state oil company, after accusing Repsol of failing to invest sufficiently in its assets as Buenos Aires moved to alleviate rising fuel prices.

The heads of Repsol’s two largest investors, the Catalan bank Caixabank and Pemex, Mexico’s state oil company, attended a meeting in Buenos Aires on Monday with Argentina’s economy minister Axel Kicillof, Spain’s industry minister José Manuel Soria and three Repsol executives.

The meeting marked a conciliation between Buenos Aires and Madrid after months of tension, with Mr Kicillof having led the drive to nationalise YPF last year and Mr Soria having warned Argentina of “serious consequences” before the seizure took place.

The position of Antonio Brufau, Repsol’s executive chairman, is less clear. Tense relations with its large shareholders in recent months spilled out in public, as Pemex attacked his salary.

While Mr Brufau was not present at the meeting, people close to Repsol’s management said he had personally approved the envoy being sent to Argentina and welcomed an agreement.

In June Repsol’s board voted against an earlier $5bn compensation proposal from YPF which involved the payment of $1.5bn in Argentina-backed debt, and a stake in the Vaca Muerta shale formation, valued by Buenos Aires at $3.5bn.

Relations between Mr Brufau and Isidro Fainé, chairman of Caixabank and deputy chairman of Repsol, who brokered the earlier rejected deal, have been strained by disagreement over how to settle the YPF issue.

Mr Fainé, who had previously travelled to Argentina to meet Ms Fernández, did not turn up to the Repsol board meeting when the proposal he had helped design was unanimously rejected.

Nonetheless, last night’s putative agreement between Spain, Argentina and Mexico to settle the YPF-Repsol dispute looks promising – Repsol shares spiked over 4 per cent on Tuesday morning on the news – although there are several provisos.

First, this is an agreement between governments, not companies. Repsol’s board still has to consider the offer on Wednesday.

Second, the details of the offer are not public yet, although it is thought to be around $5bn – less than half the amount that Repsol had been seeking in compensation for the nationalisation of its majority stake in YPF.

Third, most of that payment will be in bonds backed by the Argentine sovereign, and Argentine paper is not the best-regarded in the world. In the words of one New York judge, Argentina is a “uniquely recalcitrant debtor”.

Still, Buenos Aires’ formal recognition of this debt – and its offer to settle it – may help restore the government’s reputation. Indeed, it is part of a broader (and recent) Argentine effort to reach what is euphemistically called “financial normalisation” – a mending of broken fences with international financial markets.

Argentina recently settled some of its claims at the World Bank investment tribunal, ICSID. There is market chatter it wants to settle its Paris Club debt. There is talk, too, of possible deal that might resolve its problems with holdout creditors in New York – albeit thanks to the good graces and self-interest of Argentine exchange bondholders.

If – and this is still an ‘if’ – Argentina is also about to reach a deal with Repsol, that would not only remove a long-standing problem from the government’s bulging in-tray, it could also open the spigots on billions of dollars of investment in the country’s giant shale gas formation, Vaca Muerta.

Money coming in today would help alleviate Buenos Aires’ biggest immediate financial problem – the rapid depletion of its foreign reserves. At the current run rate, the country does not have enough reserves to last until 2015, when there are presidential elections.

It would also sow the seeds for resolving one of the country’s biggest medium term problems – Argentina’s growing energy deficit, which next year will cost the country an estimated $8bn, hard currency that Argentina does not have to spend.

So a lot is potentially at stake for Argentina. Still, the deal has not been signed off yet.

6. REPSOL SAID TO GET 10-YEAR BONDS AS YPF COMPENSATION (Bloomberg News)

By Will Kennedy and Charlie Devereux

November 26, 2013

Repsol SA (REP), the oil producer whose YPF unit was seized by Argentina’s government last year, will get $5 billion of 10-year bonds as compensation, a person briefed on the proposal said.

The agreement to pay the bonds, denominated in dollars and guaranteed by the government, will end the legal dispute between Madrid-based Repsol and Argentina, the person said, asking not to be identified before the company’s board meets to consider the proposal tomorrow.

While the accord is backed by Repsol’s management and its two largest shareholders — Mexico’s state oil company and CaixaBank SA (CABK) — the board will seek assurances that the bonds offer sufficient security and liquidity, the person said.

Spanish Economy Minister Luis de Guindos said any agreements that “remove uncertainties are good,” when asked by reporters to comment today at an event in Madrid.

If ratified, the deal would end a yearlong dispute over compensation for the seizure of 51 percent of Argentina’s biggest energy company. Repsol, which originally sought more than $10 billion, rejected a $5 billion offer in June because it involved reinvesting in Argentina in partnership with YPF.

Repsol rose 4.3 percent, the most in more than a year, to 19.24 euros by the close in Madrid. YPF’s American depositary receipts rose 9.5 percent to $29.20 in New York, the highest since March 2012. The Buenos Aires-based company rallied 11.2 percent to 259 pesos in the Argentine city, after reaching a record 270 pesos.

Buenos Aires

“There was little in Repsol’s share price for a deal,” Neill Morton, an analyst at Investec Bank Plc, said in London. “There are still a number of uncertainties with respect to valuing the impact of any deal, not least how ‘liquid’ any compensation will be.”

The agreement was negotiated in Buenos Aires yesterday by ministers from Argentina and Spain; the head of Petroleos Mexicanos, Emilio Lozoya; the chairman of CaixaBank and vice chairman of Repsol, Isidro Faine; and Repsol Chief Operating Officer Nemesio Fernandez-Cuesta.

Argentina is offering “fair and reasonable” compensation, Economy Minister Axel Kicillof told reporters today in Buenos Aires. He declined to provide the amount and form of payment, citing a confidentiality agreement.

YPF spokesman Alejandro Di Lazzaro and a Repsol official declined to comment.

“The heads of agreement involves setting a compensation amount to be paid with liquid assets and both parties desisting from legal processes,” Argentina’s government said in a statement yesterday, without disclosing details of the package.

Vaca Muerta

Argentine President Cristina Fernandez de Kirchner took control of YPF in April 2012 after a dispute over slumping oil output and investments. A day later, Repsol Chairman Antonio Brufau said the company sought $10.5 billion in compensation, based on the valuation methodology in YPF’s bylaws written by the government that privatized the company in the 1990s.

The Madrid-based producer rejected in June an offer that included a 47 percent stake in a project in the Vaca Muerta shale formation valued by Argentina at $3.5 billion, as well as $1.5 billion for development. Repsol was willing to reach a settlement that didn’t involve reinvesting in the country, Brufau said in a Nov. 21 interview.

State-owned Pemex, based in Mexico City, has an almost 10 percent stake in Repsol. Lozoya said Oct. 31 that Repsol should take a more “proactive and prudent approach” to resolve the YPF matter.

Shale Gas

Argentina holds the world’s second-largest shale gas reserves and the fourth-largest shale oil reserve, according to U.S. Energy Information Administration data. The company is offering tax and export incentives to energy companies that invest at least $1 billion over a five-year period.

Repsol asked a World Bank panel in July to help prevent YPF from developing the company’s seized assets. Repsol also filed a lawsuit demanding fair compensation for the seizure of its YPF stake with the Washington-based International Center for Settlement of Investment Disputes.

The accord will help “normalize and strengthen the historic ties between the three countries and its companies,” the Argentine government said in the statement.

“For us this helps construct a path that will allow us to continue to generate investment for the development of hydrocarbons,” Jorge Capitanich, Argentina’s cabinet chief, told reporters today. “We have an ambitious two-year program.”

The shale gas wars that have pitted the government of Argentina against Spanish oil giant Repsol could be close to concluding, after an initial agreement regarding compensation for the 2012 nationalization of YPF has been signed. Under pressure by major shareholders CaixaBank CaixaBank and Pemex, Repsol CEO Antonio Brufau appears to have been convinced of taking a $5 billion payment, half of what he was originally asking for, and to drop litigation against the Argentine oil company, which is in the process of joining forces with the likes of Chevron CVX -0.78% to ramp up production at the massive Vaca Muerta shale field.

While the specifics of the agreement haven’t been disclosed, Repsol’s board is set to vote on the agreement on Wednesday. Brufau, who had remained steadfast in his attempt at getting international courts to rule against Argentina, had created a tense atmosphere in the board room, sparking the rage of his two largest shareholders, CaixaBank and Mexican oil company Pemex.

The administration of Cristina Kirchner is willing to pay Repsol with “liquid assets,” Argentina’s Finance Ministry said in a statement. Back in June, the internal rifts in Repsol’s board surfaced after the rejection of a previous proposal by the Argentine government which stipulated paying $1.5 billion in government bonds and $3.5 billion in acreage in the Vaca Muerta shale field. Under the terms of the agreement, Repsol would enter into a joint venture with YPF, with the latter maintaining operational control, and Pemex, in order to commercialize 6.4% of Vaca Muerta. Brufau, concerned with the Argentine government’s aggressive past, rejected the proposal, sparking the Ire of Pemex CEO Emilio Lozoya who threatened to offload their 9.34% stake in the Spanish energy firm.

Brufau was forced to fold, though, after the Spanish government threw its weight behind Pemex and CaixaBank. Indeed, while Brufau is said to have approved of the deal, he remained in Madrid, while Spain’s Industry Minister, Jose Manuel Soria, negotiated with Argentine finance minister Axel Kicillof and YPF’s CEO Miguel Galuccio. Soria was joined by Repsol executives and the heads of both CaixaBank and Pemex.

The deal has important implications for global energy markets. Vaca Muerta is considered the second largest shale oil reservoir in the world by Chevron, which signed an agreement with YPF to invest in ramping up production. According to the Argentine oil company, Vaca Muerta contains 27 billion barrels of oil and 802 trillion cubic feet of natural gas. YPF doesn’t have the technical or the financial capacity to capitalize those resources, though, and has been actively looking for external partners. Beyond Chevron, YPF signed a deal with Dow Chemicals, but it has been partially blocked by Repsol’s threats of litigation.

The decision to negotiate with YPF marks a turn in the foreign policy of the Argentine government, which has remained intransigent in its financial problems with foreign institutions. After a dramatic default in 2001/2, the government of Argentina has been engaged in litigation with a group of holdout bondholder led by hedge fund Elliott Management, and has threatened to disobey rulings by the Supreme Court if they aren’t favorable. Argentina also has several cases open at the World Bank’s International Center for Settlement of Investment Disputes and debts with the Paris Club of rich nations.

Yet, spiraling inflation, which has severely eroded Argentina’s foreign reserves holdings, a difficult loss in October’s midterm elections, and a rising energy deficit seem to have forced Kirchner to change her mind. After spending about a month out of office due to brain surgery, Cristina Kirchner reshuffled her cabinet, even designating former finance minister Hernan Lorenzino to a special unit in charge of negotiating with holders of sovereign debt, the World Bank, the IMF IMF, and the Paris Club.

It is unclear whether the move represents an ideological shift or purely a pragmatic one. Reserves have fallen 26% since late-2012, breaching the $32 billion mark in November, and inflation remains out of control. Argentines are forced to cope with a dual exchange rate as capital controls and the blocking of imports have been the government’s response to the drainage. Cristina Kirchner’s approval ratings have sunk dramatically, and her party has been punished by the electorate in October. While Cristina continues to speak of “deepening the [economic] model,” it seems reality has finally dropped in. Yet, given what has been seen in the past, investors should wait for actions, rather than words, before making a value judgment as to what she is actually thinking.

BUENOS AIRES (Reuters) – Argentina said on Tuesday that a pending deal with Spanish oil major Repsol is aimed at kick-starting shale drilling in the South American country, putting an end to the long stand-off between energy investors and President Cristina Fernandez.

Nineteen months after seizing control of Argentina’s main oil company YPF (YPFD.BA: Quote, Profile, Research) from Repsol (REP.MC: Quote, Profile, Research), Fernandez’s government announced a preliminary deal late on Monday to pay Repsol for its nationalized shares.

Shares of both companies soared on reports that the pact involved a proposal by Spain’s government that Repsol receive $5 billion in compensation from the Argentine state for the 51 percent stake it grabbed in YPF last year.

The deal could set the stage for a radical increase in unconventional energy exploration and help repair a relationship with global investors left in tatters after Argentina’s massive 2002 sovereign default.

Tapping its vast shale reserves would also bolster central bank reserves drained in part by expensive oil and gas imports.

The Repsol deal showed new flexibility on the part of Fernandez, whose policy model, marked by long-running feuds with private-sector investors from farmers to sovereign bondholders, was rejected by voters who shunned her candidates in the October 27 congressional midterm election.

Early on Tuesday, Argentina’s new cabinet chief Jorge Capitanich, himself a possible 2015 presidential candidate, said the government was out to attract investment in the country’s massive Vaca Muerta shale oil and gas formation.

“We are building a path that will allow for an increase in hydrocarbon exploration and exploitation,” he told a press conference, adding that Argentina has a “very ambitious” energy program scheduled for the years ahead.

Business leaders say they hope Capitanich can moderate the policies of Axel Kicillof, the leftist academic and mastermind behind the YPF expropriation, who was named economy minister last week.

Speaking to businessmen, Kicillof said Argentina had offered Repsol “a fair and reasonable price” for the majority stake in YPF. He declined to comment on the $5 billion figure that Spain is said to want for Repsol’s compensation, or on the form that the compensation might take, cash or bonds.

Already the world’s No. 3 corn and soybean exporter, Argentina stands to become a major oil and gas producer as well if the government can attract the tens of billions of dollars it needs to exploit the Vaca Muerta (Dead Cow) shale formation

The Repsol-YPF deal is set to be voted on at a Repsol board meeting scheduled for Wednesday in Madrid.

Fernandez has long railed against orthodox prescriptions for Argentina’s economy, which is ailing from one of the world’s highest inflation rates and low confidence caused by heavy trade and currency controls. Her interventionist policies have kept investment out of Latin America’s No. 3 economy.

That could change if international energy companies see enough market-friendly signals to tempt them into Vaca Muerta.

“The understanding with Repsol shows that the government, when in need, can show a remarkable degree of pragmatism. An understanding with Repsol should facilitate YPF negotiations with other oil companies interested in Vaca Muerta,” said Ignacio Labaqui, an analyst with Medley Global Advisors.

YPF is the biggest stake-holder in Vaca Muerta. The company estimates the field contains 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas, making it one of the biggest shale reserves in the Western Hemisphere.

Dow Chemical Co (DOW.N: Quote, Profile, Research) has signed on to invest up to $120 million in 16 Vaca Muerta gas wells, and oil giant Chevron Corp (CVX.N: Quote, Profile, Research) has agreed to invest $1.24 billion in the area.

To clinch the deals, Argentina has allowed the companies to export tax-free up to 20 percent of what they produce. Export revenue of companies that invest at least $1 billion over five years is exempt from government foreign exchange controls.

Not only did the nationalization sour relations between Buenos Aires and Madrid, it is still hampering Argentine efforts to draw international investors to the South American country.

Argentine government sources quoted in government-backed media gave scant details, and Repsol declined comment on reports it was offered $5 billion compensation, about half of what it demanded after YPF’s nationalization.

But the talks in Buenos Aires, attended by senior Repsol executives and Spanish government officials, did move forward, the reports said, if only because Argentine needs a less quarrelsome Spain to go ahead with its plans for preparing nationalized YPF for bigger things.

Energy giant Chevron pledged support to those plans, despite objections from Repsol, but the government of President Cristina Fernandez is nowhere near implementing its plan to reinvent YPF and develop the country’s newly found shale oil reserves.

Argentina spends about $15 billion a year on oil and gas imports and the shale reserves are seen as a panacea for the country’s growing energy dependence. The shale-oil and gas deposits in Neuquen province were discovered by Repsol just before it lost YPF to the government takeover.

The deposits are considered enough to eliminate Argentina’s energy import bill but industry estimates show developing them will cost more than $60 billion.

The Vaca Muerta, or Dead Cow, shale deposit is said by experts to hold 16 billion barrels of shale oil and 308 trillion cubic feet of shale gas. If properly developed, the shale bonanza potentially will make Argentina the world’s fourth-largest producer of shale oil.

The shale gas reserves in Argentina are estimated to be the world’s third-largest, after China and the United States.

Argentine compromise proposals have included offers to Repsol to return and develop the shale reserves, an offer received with little enthusiasm in Madrid.

Repsol’s 51 percent share in YPF was seized by Fernandez after charges the company didn’t invest enough of its local earnings into developing YPF’s energy potential. Repsol denied the accusation, Argentina’s main reason for nationalization, and pressed for more than $10 billion in compensation.

Repsol has made clear to Argentine it will continue to obstruct Vaca Muerta development and challenge Argentine efforts to bring in other companies unless it is adequately compensated.

Argentine Ministry of Economy officials said an “agreement in principle” for compensating Repsol had been reached but did not outline its terms.

The ministry’s statement, however, said the agreement provides that “both sides will end their respective legal actions” once an agreement is in place. Analysts said it was more important for Argentina not to have a litigant and hostile Repsol in its way as it tries to exploit Vaca Muerta potential for giving it energy independence.

BUENOS AIRES, Argentina (AP) – Argentina’s government said Monday it has reached an agreement in principle to compensate Spain’s Repsol for last year’s 51 percent expropriation of the YPF energy company.

Repsol, YPF and Mexico’s Pemex state oil company, which holds a stake in Repsol, said they agreed tentatively on a process for determining a compensation amount. The parties also agreed to suspend legal actions.

Argentina expropriated the Spain-based Repsol’s controlling stake in YPF on April 16, 2012, without paying a single cent. The government claimed Repsol was not investing enough in the South American country’s oil industry.

The recovery of Argentina’s national oil company, which was privatized in the 1990s, was hugely popular among Argentines because many blame the privatizations and other free-market policies of that decade for the country’s economic crisis and debt default in 2001-2002.

But the seizure infuriated Spain and led to criticism by the European Union, the United States and even some Latin American leaders.

The Spanish energy giant has been demanding $10.5 billion in compensation and had sued Argentina seeking payment.

The preliminary deal was reached after company and government officials from Argentina, Spain and Mexico met in Buenos Aires. No other details of the agreement were released and it must be ratified during a Repsol board meeting Wednesday.

If confirmed, it could pave the way for Pemex to join the exploration of the vast Vaca Muerta (Dead Cow) oil deposit in Neuquen province, where YPF says 15 teams are already extracting more than 10,000 barrels a day.

Argentina has the world’s third-largest deposits of shale oil and gas and needs international help to develop them. But only a couple of major oil companies have made commitments since Repsol threatened to sue Chevron and any other company that worked with YPF on the fields that were discovered when Repsol had a controlling stake in YPF.

An agreement in principle on compensation by the Argentinian government for the expropriation in April 2012 of Spanish energy company Repsol’s 51% stake in Argentinian energy firm YPF has been reached. A final agreement is awaiting approval by Repsol’s board.

Analysis

A compensation deal with Repsol is vital to YPF’s chances of securing new joint ventures to develop Argentina’s huge shale oil and gas resources. In the 18 months since its nationalisation, YPF has secured a joint-venture agreement with Chevron (US), but total foreign investment (FDI) has been well below the government’s expectations-and below the levels required to reverse Argentina’s growing energy deficit. The latter is becoming a severe drain on the current account and the foreign reserves as energy imports rise to keep pace with domestic demand amid falling domestic production.

The terms of the deal have not yet been made public, and may not in fact have been finalised. In a statement the Argentinian Ministry of the Economy suggested that Repsol would receive liquid assets (possibly dollar bonds) in exchange for agreeing to give up its various legal claims that are stymieing investor interest in YPF. Repsol appears to be seeking cash. A figure of US$5bn is unconfirmed, but would represent an improvement on YPF’s previous offer of US$1.5bn plus participation in a joint-venture in Vaca Muerta (a huge shale oil and gas field first discovered by Repsol when it was operating in Argentina in 2010). It is still far less than Repsol’s original demand of US$10.5bn, but the company’s major shareholders, which include the state-owned Mexican oil company, Petróleos Mexicanos (Pemex; which is apparently interested in investing in Argentinian shale), have been pressuring Repsol’s management to reach a deal, and a final agreement could well be confirmed soon.

BUENOS AIRES (MNI) – Argentina expects a proposed agreement for compensating Repsol for the seizure of the Spanish energy company’s shares in Argentina’s YPF will unleash fresh investment to rebuild energy supplies after a decade of decline, a senior official said Tuesday.

Argentine Chief of Staff Jorge Capitanich said a deal brokered Monday between Argentina and Repsol will create “a path that will make it possible to continue generating investment mechanisms for the exploration and production of hydrocarbons” in Argentina.

The country has “a very ambitious program for the next few years” in developing oil and natural gas supplies, he said in a televised press conference.

Capitanich, who took over the day-to-day management of the economy after President Cristina Fernandez de Kirchner named him to the post last week, said more details of the Repsol-YPF agreement would be made known by Economy Minister Axel Kicillof as soon as Tuesday.

Capitanich declined to say how much Argentina would offer to pay Repsol for the 51% stake in lost in YPF.

Repsol has said it wants around $10 billion, but reports suggest the amount could be half of that.

The “accord in principle” was reached Monday in talks brokered by Mexico’s state energy company Pemex in Buenos Aires. Pemex has a 9.5% stake in Repsol and a seat on the board, while Repsol still owns a 6% interest in YPF.

Argentina has started to slow a decade-long decline in oil and gas production with YPF now under state control.

YPF, which produces a third of the country’s 540,000 barrels per day of oil and a quarter of its 114 million cubic meters per day of gas, is ramping up investment by reinvesting most of its profits. The aim is to increase its own production of oil by 4% and gas by 1% this year after a decade of declining at a combined 6% annual. The growth targets for 2014 are similar.

However, analysts say the asset expropriation from Repsol has discouraged investors, making it harder for YPF to reach partnership deals with the deep-pocketed companies it needs.

So far, YPF has only reached one major deal with Chevron for a $1.5 billion plan to develop shale resources in the Vaca Muerta play in the southwest. The play is thought to have among the world’s greatest production potential and could put Argentina on track to become a net energy exporter – an impact similar to the shale boom in the United States.

Analysts, however, say that up to $100 billion must be invested to put Vaca Muerta into the mass production, and that without settling differences with Repsol it would be hard to attract such an amount.

Opposition figures applauded the Repsol-YPF agreement, which still needs the approval of the Repsol board due to meet Wednesday.

Buenos Aires Mayor Mauricio Macri, a leading opposition figure, said Tuesday that the agreement was “positive.”

When Argentina seized control of YPF in April 2012, Macri said he publicly opposed what he called “a confiscation,” saying that it was an act of “robbery” that would play against the country.

He said he forecast has come true. “The energy deficit increased and we have isolated ourselves even more from the world,” he said on radio.

Congressman Alberto Roberti, who is aligned with Tigre Mayor Sergio Massa, another leading opposition figure, said that the agreement is a demonstration that “Argentina has gone from a hostile position to one that is more conciliatory.”

He added on radio: “It is impossible to think that Argentina could grow internationally without these types of agreements.”

Argentina seized control of YPF on grounds that Repsol failed to adequately invest to arrest a decade-long decline in oil and gas production that was pushing up energy imports and cutting energy exports.

Oil and gas production, which meet nearly 90% of the country’s energy needs, fell because of maturing reserves and limited exploration to make new finds. Many of the oil companies in the country reined in spending after a 2001-02 economic collapse brought a surge in state intervention in the sector, including price controls, export restrictions and threats of throwing executives behind bars for failing to adequately supplying the sector.

The dwindling production has chipped away at the trade surplus, a major source of foreign currencies for sustaining the foreign reserves to help pay the national debt given that Argentina can’t readily return to global financial markets until it fully settles a $100 billion default from 2001.

The trade surplus narrowed to $7.9 billion in the first 10 months of 2013 from $10.8 billion in the year-earlier period, led by a 26% increase in fuel imports and 22% decline in energy exports.

The government has said that the shrinking trade surplus is behind about a quarter of the drop in foreign reserves this year, which have dropped 27% this year to $31.5 billion from $43.2 billion at the start of the year.

Most of the rest of the drop in foreign reserves stems from paying the national debt, officials have said.

Buenos Aires (Platts)–26Nov2013/156 pm EST/1856 GMT Argentina’s Economy Minister Axel Kicillof said Tuesday that Repsol will be compensated for the 51% stake in YPF that Argentina seized from the Spanish company last year, but he declined to say how much because of a confidentiality agreement.

“We are respecting the [Argentinian] law that says that we must pay a compensation to who was the owner of the 51% of the shares,” he said in a televised chat with reporters on the sidelines of a construction conference in Buenos Aires.

Kicillof, a big proponent of the state takeover of YPF from Repsol in April 2012, said he could not say how much will be paid because of a “confidentiality pact” that will remain in force until the Repsol board of directors approves the deal. The board is due to meet on the issue Wednesday.

“We want to pay a fair price,” Kicillof said.

He added that Repsol acted “a bit hastily” in months after the expropriation in suggesting it should be compensated from between $10.5 billion to $15 billion.

Kicillof, who was named as economy minister last week and sits on the YPF board of directors, said the negotiations with Repsol over the past 19 months have been “arduous.”

Mexico’s state energy company Pemex, a main shareholder of Repsol, on Monday brokered “an accord in principle” between Argentina and Repsol for a settlement of the legal and diplomatic dispute. Argentina took 51% of YPF, the country’s biggest energy company, under state control from Repsol in April 2012 on grounds that the Madrid-based company had failed to adequately invest.

Earlier Tuesday, Argentine Chief of Staff Jorge Capitanich said the agreement will open the door for new investment in the Argentine energy sector.

Analysts have said the expropriation scared away many investors on concerns the same could happen to them as Repsol.

Argentina needs billions of dollars in investment as well as foreign equipment, know-how and technology to arrest a decade-long decline in oil and gas production that is pushing it to greater reliance on imported diesel, fuel oil and gas. Argentina holds among the world’s largest shale resources, and analysts say the development of Vaca Muerta, its biggest shale play, will require upwards of $100 billion in investment.

YPF has arranged an investment partnership with Chevron for developing a small tract of Vaca Muerta with an initial $1.5 billion in spending. Another deal with Dow Chemical is for $188 million in spending.

Talks with other companies have yet to lead to more partnership agreements, even as YPF starts producing shale resources, with output reaching 13,000 b/d of oil equivalent in the third quarter of 2013.

Changes in the Argentine cabinet on 19 November appear to have promoted a nuanced change of style in government dealings with the private sector, with more emphasis being put on positive engagement. This was highlighted yesterday (25 November) by sources at Argentina’s ministry of economy, who said on Monday (25 November) that they were close to reaching an agreement with Spanish oil company Repsol over the nationalisation of the latter’s majority stake in YPF in April-May 2012. According to local media sources, the agreement to compensate Repsol was possible thanks to direct negotiations between the governments of Spain and Argentina. On the Argentine side, the talks involved the new minister of economy Alex Kicillof; the influential legal presidential adviser Carlos Zannini; the president of YPF, Miguel Galuccio; and Argentina’s ambassador to Spain, Carlos Bettini.

Spain was represented by the Minister of Industry and Energy Jose Manuel Soria, the head bank Caixabank (holder of a 13% stake in Repsol), as well as senior executives of Repsol. Emilio Lozoya, the president of Mexico’s state-owned energy company Pemex, which has 9.5% stake in Repsol, also took part in the meeting. Significantly, the president of Repsol, Atonio Brufau, under whose leadership YPF-Repsol was nationalised, was not present. Last week, Pemex, in its capacity as a Repsol shareholder, has strongly criticised the excessive payments enjoyed by Brufau. The proposed deal would be put to Repsol’s board of directors on Wednesday (27 November). Although specifics on the amount of compensation were not disclosed, sources at the Argentine government, said that the offer would include payment of liquid assets and the agreement from both parties to renounce international arbitration at ICSID, the World Bank’s foreign investment court.

Significance: The deal is the culmination of a protracted negotiation process in which Pemex appears to have played a vital role. Repsol had initially put the expected compensation at USD10.5 billion to reflect among other assets the loss of Vaca Muerta, considered to be one of the world’s largest shale gas fields, but Argentina considered the valuation as excessively high. However, the recent developments suggest that Repsol has now lowered its compensation expectations. Spanish media sources said that the company has been offered USD5 billion; it is not clear whether a participation of Repsol in Vaca Muerta is part of the deal. While negotiations with Repsol have been going on since early 2013, it appears the recent Argentine cabinet reshuffle has helped to speed up the agreement. After the October mid-term election setback it experienced, and mindful of the need to contain a rapid fall in international reserves and secure the development of Vaca Muerta, the Argentine government has been trying to engage more positively with the private sector and the opposition, including seeking talks with leading opposition politicians Mauricio Macri and Antonio Bonfatti on a range of issues.

15. APACHE MAY BE SELLING SOUTH AMERICAN ASSETS (Houston Business Journal Online)

By Katy Stewart

26 November 2013

A source familiar with the matter says that Apache and state-controlled energy company YPF may be in talks to sell some or all of its Argentine assets, Reuters reports.

The Houston-based company has stakes in about 25 fields in Argentina and the Argentine assets produced about six percent of Apache’s total output last year.

Should Apache sell the assets to YPF, Argentina would be the second largest holder of shale gas reserves after China, according to Reuters.

Neither Apache nor YPF commented.

Apache (NYSE: APA) has been selling assets elsewhere this year, as well, after the company said in May it would sell $4 billion in assets to strengthen its balance sheets and reduce debt.

In October alone Apache sold $3.75 billion in Gulf of Mexico assets to fellow Houston-based company Fieldwood Energy LLC. Fieldwood is a portfolio company of New York-based private equity firm Riverstone Holdings LLC.

In September, Apache sold $112 million in Canada, and partnered with China’s Sinopec Group for $3.1 billion in exchange for a 33 percent minority stake in its Egyptian oil and gas business.

16. AEROLINEAS ARGENTINAS TO RESTORE FLIGHTS TO J.F.K. (NYT Blogs)

By Michael T. Luongo

26 November 2013

As many international airlines expanded to take advantage of Argentina’s post-peso crisis tourist boom, the country’s own national airline, Aerolineas Argentinas, seemed to go in reverse, even discontinuing its flight between New York’s Kennedy International Airport and Buenos Aires’ Ezeiza airports in 2008.

Management disarray and frequent worker strikes also meant domestically and within South America, the airline started losing market share to Chile’s LAN and Brazil’s TAM.

Aerolineas has been rectifying this recently, however, purchasing planes to replace and expand its fleet. The airline will also restore its daily Kennedy-Ezeiza flights, beginning on Dec.16. The flight numbers are AR 1300 from Buenos Aires to New York leaving at 11 p.m., and AR 1301 for the return leaving at 3:25 p.m.

Marcelo William Bottini, Aerolineas’ regional director for North and Central America, said the company’s total fleet jumped to 63 planes this year from 26 aircraft in 2006, with the average fleet age dropping from 16 to four years during that time.

Mr. Bottini said two new Airbus 330-200 planes will be used for the new New York flight and the already existing Miami connection, with configurations of 24 lie-flat seats in Club Condor and 242 seats in economy with new on-demand in-flight entertainment systems.

Mr. Bottini acknowledged that the airline has been plagued by issues over the years, but said, “Aerolineas Argentinas has taken many steps to improve our service and reputation, which were both damaged in the past. We have come a long way in a short amount of time.”

He also said that special Visit Argentina saver fares are available only for foreigners to use domestically to travel among 33 Argentine cities if they have entered the country on an Aerolineas Argentinas flight.

—

JFK’s WIT

President Kennedy on 29 April 1962 at a dinner party honoring Nobel Prize winners:

“I think this is the most extraordinary collection of talent that has ever been gathered together, with the possible exception of when Thomas Jefferson dined alone.”

PILOT’S TEST :- So you think that you know geography?

Just clickon where you think the city is and the plane will land there,then it will show where the city actually is!!Good luck!! This is a lot of fun and informative too.

President Anderson, members of the faculty, board of trustees, distinguished guests, my old colleague, Senator Bob Byrd, who has earned his degree through many years of attending night law school, while I am earning mine in the next 30 minutes, distinguished guests, ladies and gentlemen:

It is with great pride that I participate in this ceremony of the American University, sponsored by the Methodist Church, founded by Bishop John Fletcher Hurst, and first opened by President Woodrow Wilson in 1914. This is a young and growing university, but it has already fulfilled Bishop Hurst’s enlightened hope for the study of history and public affairs in a city devoted to the making of history and the conduct of the public’s business. By sponsoring this institution of higher learning for all who wish to learn, whatever their color or their creed, the Methodists of this area and the Nation deserve the Nation’s thanks, and I commend all those who are today graduating.

Professor Woodrow Wilson once said that every man sent out from a university should be a man of his nation as well as a man of his time, and I am confident that the men and women who carry the honor of graduating from this institution will continue to give from their lives, from their talents, a high measure of public service and public support.

“There are few earthly things more beautiful than a university,” wrote John Masefield in his tribute to English universities–and his words are equally true today. He did not refer to spires and towers, to campus greens and ivied walls. He admired the splendid beauty of the university, he said, because it was “a place where those who hate ignorance may strive to know, where those who perceive truth may strive to make others see.”

I have, therefore, chosen this time and this place to discuss a topic on which ignorance too often abounds and the truth is too rarely perceived–yet it is the most important topic on earth: world peace.

What kind of peace do I mean? What kind of peace do we seek? Not a Pax Americana enforced on the world by American weapons of war. Not the peace of the grave or the security of the slave. I am talking about genuine peace, the kind of peace that makes life on earth worth living, the kind that enables men and nations to grow and to hope and to build a better life for their children–not merely peace for Americans but peace for all men and women–not merely peace in our time but peace for all time.

I speak of peace because of the new face of war. Total war makes no sense in an age when great powers can maintain large and relatively invulnerable nuclear forces and refuse to surrender without resort to those forces. It makes no sense in an age when a single nuclear weapon contains almost ten times the explosive force delivered by all the allied air forces in the Second World War. It makes no sense in an age when the deadly poisons produced by a nuclear exchange would be carried by wind and water and soil and seed to the far corners of the globe and to generations yet unborn.

Today the expenditure of billions of dollars every year on weapons acquired for the purpose of making sure we never need to use them is essential to keeping the peace. But surely the acquisition of such idle stockpiles–which can only destroy and never create–is not the only, much less the most efficient, means of assuring peace.

I speak of peace, therefore, as the necessary rational end of rational men. I realize that the pursuit of peace is not as dramatic as the pursuit of war–and frequently the words of the pursuer fall on deaf ears. But we have no more urgent task.

Some say that it is useless to speak of world peace or world law or world disarmament–and that it will be useless until the leaders of the Soviet Union adopt a more enlightened attitude. I hope they do. I believe we can help them do it. But I also believe that we must reexamine our own attitude–as individuals and as a Nation–for our attitude is as essential as theirs. And every graduate of this school, every thoughtful citizen who despairs of war and wishes to bring peace, should begin by looking inward–by examining his own attitude toward the possibilities of peace, toward the Soviet Union, toward the course of the cold war and toward freedom and peace here at home.

First: Let us examine our attitude toward peace itself. Too many of us think it is impossible. Too many think it unreal. But that is a dangerous, defeatist belief. It leads to the conclusion that war is inevitable–that mankind is doomed–that we are gripped by forces we cannot control.

We need not accept that view. Our problems are manmade–therefore, they can be solved by man. And man can be as big as he wants. No problem of human destiny is beyond human beings. Man’s reason and spirit have often solved the seemingly unsolvable–and we believe they can do it again.

I am not referring to the absolute, infinite concept of peace and good will of which some fantasies and fanatics dream. I do not deny the value of hopes and dreams but we merely invite discouragement and incredulity by making that our only and immediate goal.

Let us focus instead on a more practical, more attainable peace– based not on a sudden revolution in human nature but on a gradual evolution in human institutions–on a series of concrete actions and effective agreements which are in the interest of all concerned. There is no single, simple key to this peace–no grand or magic formula to be adopted by one or two powers. Genuine peace must be the product of many nations, the sum of many acts. It must be dynamic, not static, changing to meet the challenge of each new generation. For peace is a process–a way of solving problems.

With such a peace, there will still be quarrels and conflicting interests, as there are within families and nations. World peace, like community peace, does not require that each man love his neighbor–it requires only that they live together in mutual tolerance, submitting their disputes to a just and peaceful settlement. And history teaches us that enmities between nations, as between individuals, do not last forever. However fixed our likes and dislikes may seem, the tide of time and events will often bring surprising changes in the relations between nations and neighbors.

So let us persevere. Peace need not be impracticable, and war need not be inevitable. By defining our goal more clearly, by making it seem more manageable and less remote, we can help all peoples to see it, to draw hope from it, and to move irresistibly toward it.

Second: Let us reexamine our attitude toward the Soviet Union. It is discouraging to think that their leaders may actually believe what their propagandists write. It is discouraging to read a recent authoritative Soviet text on Military Strategy and find, on page after page, wholly baseless and incredible claims–such as the allegation that “American imperialist circles are preparing to unleash different types of wars . . . that there is a very real threat of a preventive war being unleashed by American imperialists against the Soviet Union . . . [and that] the political aims of the American imperialists are to enslave economically and politically the European and other capitalist countries . . . [and] to achieve world domination . . . by means of aggressive wars.”

Truly, as it was written long ago: “The wicked flee when no man pursueth.” Yet it is sad to read these Soviet statements–to realize the extent of the gulf between us. But it is also a warning–a warning to the American people not to fall into the same trap as the Soviets, not to see only a distorted and desperate view of the other side, not to see conflict as inevitable, accommodation as impossible, and communication as nothing more than an exchange of threats.

No government or social system is so evil that its people must be considered as lacking in virtue. As Americans, we find communism profoundly repugnant as a negation of personal freedom and dignity. But we can still hail the Russian people for their many achievements–in science and space, in economic and industrial growth, in culture and in acts of courage.

Among the many traits the peoples of our two countries have in common, none is stronger than our mutual abhorrence of war. Almost unique among the major world powers, we have never been at war with each other. And no nation in the history of battle ever suffered more than the Soviet Union suffered in the course of the Second World War. At least 20 million lost their lives. Countless millions of homes and farms were burned or sacked. A third of the nation’s territory, including nearly two thirds of its industrial base, was turned into a wasteland–a loss equivalent to the devastation of this country east of Chicago.

Today, should total war ever break out again–no matter how–our two countries would become the primary targets. It is an ironic but accurate fact that the two strongest powers are the two in the most danger of devastation. All we have built, all we have worked for, would be destroyed in the first 24 hours. And even in the cold war, which brings burdens and dangers to so many nations, including this Nation’s closest allies–our two countries bear the heaviest burdens. For we are both devoting massive sums of money to weapons that could be better devoted to combating ignorance, poverty, and disease. We are both caught up in a vicious and dangerous cycle in which suspicion on one side breeds suspicion on the other, and new weapons beget counterweapons.

In short, both the United States and its allies, and the Soviet Union and its allies, have a mutually deep interest in a just and genuine peace and in halting the arms race. Agreements to this end are in the interests of the Soviet Union as well as ours–and even the most hostile nations can be relied upon to accept and keep those treaty obligations, and only those treaty obligations, which are in their own interest.

So, let us not be blind to our differences–but let us also direct attention to our common interests and to the means by which those differences can be resolved. And if we cannot end now our differences, at least we can help make the world safe for diversity. For, in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.

Third: Let us reexamine our attitude toward the cold war, remembering that we are not engaged in a debate, seeking to pile up debating points. We are not here distributing blame or pointing the finger of judgment. We must deal with the world as it is, and not as it might have been had the history of the last 18 years been different.

We must, therefore, persevere in the search for peace in the hope that constructive changes within the Communist bloc might bring within reach solutions which now seem beyond us. We must conduct our affairs in such a way that it becomes in the Communists’ interest to agree on a genuine peace. Above all, while defending our own vital interests, nuclear powers must avert those confrontations which bring an adversary to a choice of either a humiliating retreat or a nuclear war. To adopt that kind of course in the nuclear age would be evidence only of the bankruptcy of our policy–or of a collective death-wish for the world.

To secure these ends, America’s weapons are nonprovocative, carefully controlled, designed to deter, and capable of selective use. Our military forces are committed to peace and disciplined in self- restraint. Our diplomats are instructed to avoid unnecessary irritants and purely rhetorical hostility.

For we can seek a relaxation of tension without relaxing our guard. And, for our part, we do not need to use threats to prove that we are resolute. We do not need to jam foreign broadcasts out of fear our faith will be eroded. We are unwilling to impose our system on any unwilling people–but we are willing and able to engage in peaceful competition with any people on earth.

Meanwhile, we seek to strengthen the United Nations, to help solve its financial problems, to make it a more effective instrument for peace, to develop it into a genuine world security system–a system capable of resolving disputes on the basis of law, of insuring the security of the large and the small, and of creating conditions under which arms can finally be abolished.

At the same time we seek to keep peace inside the non-Communist world, where many nations, all of them our friends, are divided over issues which weaken Western unity, which invite Communist intervention or which threaten to erupt into war. Our efforts in West New Guinea, in the Congo, in the Middle East, and in the Indian subcontinent, have been persistent and patient despite criticism from both sides. We have also tried to set an example for others–by seeking to adjust small but significant differences with our own closest neighbors in Mexico and in Canada.

Speaking of other nations, I wish to make one point clear. We are bound to many nations by alliances. Those alliances exist because our concern and theirs substantially overlap. Our commitment to defend Western Europe and West Berlin, for example, stands undiminished because of the identity of our vital interests. The United States will make no deal with the Soviet Union at the expense of other nations and other peoples, not merely because they are our partners, but also because their interests and ours converge

Our interests converge, however, not only in defending the frontiers of freedom, but in pursuing the paths of peace. It is our hope– and the purpose of allied policies–to convince the Soviet Union that she, too, should let each nation choose its own future, so long as that choice does not interfere with the choices of others. The Communist drive to impose their political and economic system on others is the primary cause of world tension today. For there can be no doubt that, if all nations could refrain from interfering in the self-determination of others, the peace would be much more assured.

This will require a new effort to achieve world law–a new context for world discussions. It will require increased understanding between the Soviets and ourselves. And increased understanding will require increased contact and communication. One step in this direction is the proposed arrangement for a direct line between Moscow and Washington, to avoid on each side the dangerous delays, misunderstandings, and misreadings of the other’s actions which might occur at a time of crisis.

We have also been talking in Geneva about the other first-step measures of arms control designed to limit the intensity of the arms race and to reduce the risks of accidental war. Our primary long range interest in Geneva, however, is general and complete disarmament– designed to take place by stages, permitting parallel political developments to build the new institutions of peace which would take the place of arms. The pursuit of disarmament has been an effort of this Government since the 1920’s. It has been urgently sought by the past three administrations. And however dim the prospects may be today, we intend to continue this effort–to continue it in order that all countries, including our own, can better grasp what the problems and possibilities of disarmament are.

The one major area of these negotiations where the end is in sight, yet where a fresh start is badly needed, is in a treaty to outlaw nuclear tests. The conclusion of such a treaty, so near and yet so far, would check the spiraling arms race in one of its most dangerous areas. It would place the nuclear powers in a position to deal more effectively with one of the greatest hazards which man faces in 1963, the further spread of nuclear arms. It would increase our security–it would decrease the prospects of war. Surely this goal is sufficiently important to require our steady pursuit, yielding neither to the temptation to give up the whole effort nor the temptation to give up our insistence on vital and responsible safeguards.

I am taking this opportunity, therefore, to announce two important decisions in this regard.

First: Chairman khrushchev, Prime Minister Macmillan, and I have agreed that high-level discussions will shortly begin in Moscow looking toward early agreement on a comprehensive test ban treaty. Our hopes must be tempered with the caution of history–but with our hopes go the hopes of all mankind.

Second: To make clear our good faith and solemn convictions on the matter, I now declare that the United States does not propose to conduct nuclear tests in the atmosphere so long as other states do not do so. We will not be the first to resume. Such a declaration is no substitute for a formal binding treaty, but I hope it will help us achieve one. Nor would such a treaty be a substitute for disarmament, but I hope it will help us achieve it.

Finally, my fellow Americans, let us examine our attitude toward peace and freedom here at home. The quality and spirit of our own society must justify and support our efforts abroad. We must show it in the dedication of our own lives–as many of you who are graduating today will have a unique opportunity to do, by serving without pay in the Peace Corps abroad or in the proposed National Service Corps here at home.

But wherever we are, we must all, in our daily lives, live up to the age-old faith that peace and freedom walk together. In too many of our cities today, the peace is not secure because the freedom is incomplete.

It is the responsibility of the executive branch at all levels of government–local, State, and National–to provide and protect that freedom for all of our citizens by all means within their authority. It is the responsibility of the legislative branch at all levels, wherever that authority is not now adequate, to make it adequate. And it is the responsibility of all citizens in all sections of this country to respect the rights of all others and to respect the law of the land.

All this is not unrelated to world peace. “When a man’s ways please the Lord,” the Scriptures tell us, “he maketh even his enemies to be at peace with him.” And is not peace, in the last analysis, basically a matter of human rights–the right to live out our lives without fear of devastation–the right to breathe air as nature provided it–the right of future generations to a healthy existence?

While we proceed to safeguard our national interests, let us also safeguard human interests. And the elimination of war and arms is clearly in the interest of both. No treaty, however much it may be to the advantage of all, however tightly it may be worded, can provide absolute security against the risks of deception and evasion. But it can–if it is sufficiently effective in its enforcement and if it is sufficiently in the interests of its signers–offer far more security and far fewer risks than an unabated, uncontrolled, unpredictable arms race.

The United States, as the world knows, will never start a war. We do not want a war. We do not now expect a war. This generation of Americans has already had enough–more than enough–of war and hate and oppression. We shall be prepared if others wish it. We shall be alert to try to stop it. But we shall also do our part to build a world of peace where the weak are safe and the strong are just. We are not helpless before that task or hopeless of its success. Confident and unafraid, we labor on–not toward a strategy of annihilation but toward a strategy of peace.